A model debt cancellation product rolled out jointly by the Defense Credit Union Council and CUNA Mutual Group and targeted to military credit unions has potential for strong growth, according to its backers.
Tom Keepers, assistant vice president of lending solution development at CUNA Mutual Group, said it is "too early to tell" how many members would be enrolled in the program "made available right at the end of 2004".
On the other hand, noted Arty Arteaga, president of the DCUC, the product has good potential as continued military deployment appears likely. The Defense CU Council represents 260 credit unions which serve the military worldwide and which have 13-million individual members, including military and civilians.
CUNA Mutual's Keepers says that the debt cancellation product for military aims to help both the credit union and their members be free of debt in cases of loss of life or involuntary unemployment.
A member "pays a fee, and in exchange for the fee, a CU agrees to forgive all or part of the debt," Keepers said. There are several protection possibilities and pricing depends on the way the credit union has structured the product. Credit unions may design a package to cover for loss of life, disability, involuntary unemployment. Another may cover a home equity loan. Some credit unions may have two packages," he said.
"It's somewhat comparable to credit life and disability insurance," Keepers explained. He said CUNA Mutual works with credit unions to first set the right price. Once the product is sold "they (CUs) transfer over to the insurance company, in this case CUNA Mutual, what is known as the Contractual Liability Policy," he said.
The Defense CU Council's Arteaga said that the conception of the project goes back to about "a month and a half into the war in Iraq" when a credit union member approached him to show concern not only about potential casualties and disabilities among members who are deployed, but also the effect of such situations on the credit union's portfolios.
He said the product is very flexible and allows different options including non-honorable discharge and reservists coming on active duty, with different pricing for each. "One of the options is that the credit union can opt to buy the product instead of the service member," he said.
In many cases a member who is a reservist is called for duty and loses income from previous employment. That can lead to an inability to make monthly payment obligations.
The debt cancellation program "cancels or defers the debt," said Arteaga.
The government is not subsidizing the program and there are no appropriated funds to help, he said. The debt cancellation is an initiative of "strictly CUNA Mutual Group with the Defense Credit Union Council providing some guidance and laying out the needs," Arteaga said.
